Traditional communication systems and methods of reaching desired audiences among the masses mainly rely upon the broadcasting model, such as mass mailings and television/radio advertisements to inform potential consumers of various offerings in the hopes of increasing business.
But, the traditional broadcasting model is highly inefficient and research has shown that only a small fraction of the population pays any attention to these broadcasts. Using free standing inserts (“FSI”) as an example, it has been estimated that merchants spend about $3 billion annually on marketing campaigns, while the amount actually redeemed by the consumers (i.e., those that have responded) is estimated to be only about $30 million, or only about a 1% response rate. Response rates to other forms of broadcast are generally unknown and difficult to quantify.
Merchants also use emails as a cheaper marketing channel in an effort to make the marketing process more efficient. But, consumers become overwhelmed with unsolicited advertisement emails (i.e., “spam”) and all of its various forms of unsolicited advertisements, such as “pop-ups” (e.g., unsolicited advertisements that pop up during Internet use) and discard these indiscriminant communications. The result is tremendous waste in marketing spend for a miniscule return.
In an attempt to focus the communications to be more relevant, the communications industry has recently been developing ways to match information to recipients to find more information of interest. This is often referred to as targeted marketing. This can be based on demographic data. But, this information, for example gender and location of residence, is generally insufficient to assure offers that may be interesting to the user. To supplement this information, others try to obtain information to profile the users' interests.
Unfortunately, profiles are only as useful as the information provided by the user. If the user provides false information or does not provide any information during registration, the targeted information will be irrelevant and therefore useless. Usually profiling is achieved by presenting users with vague questions to elicit the required information. For example, a typical “general interest” category may be listed as “outdoors.” If a user designates “outdoors” as an interest during registration, the user may get advertisements and/or offers ranging from hiking shoes to picnic accessories to travel magazines because such a preference is so vague. These so-called targeted communications are only slightly more effective than general broadcasting.
Some service providers have begun to supplement the vague user preference categories with tracked user activities, such as purchases made by the user. But, targeted advertisements and offers from these known systems are ineffective because the offered contents are almost always done in hindsight, i.e., based on past activities and, therefore, tend to be too late.
In addition to targeting communications, certain business use incentives to attract customers. For example, coupons are one of the vehicles used to encourage consumers to purchase specific products and/or spend at a particular business. Currently, some 300 billion coupons are distributed annually in the United States through an approximately $6 billion national coupon industry. Approximately half of the estimated $6 billion goes towards the actual incentive with the other half going towards administration. Combining this estimate with the fact that approximately 99% of the coupons end up in the trash, unused, and unredeemed, consumers only benefit from approximately $30 million in redeemed incentives (i.e., only about 0.5% of the $6 billion actually goes to the consumers).
What is needed, therefore, is a cost-efficient and convenient incentive redemption system and method that would provide benefits to both the consumers and merchants.
Another type of incentive typically used to draw consumers to usage is a rewards/loyalty program. The main marketing thrust of a rewards/loyalty program is to register, maintain, and increase consumer usage of a particular merchant or service provider by offering various incentives to the members of the program. Approximately 160 million people belong to an airline loyalty program, and approximately 32 million people belong to a credit card rewards program. Businesses spend an estimated $25 billion on rewards and incentives. Companies spend an estimated $50 million on employee rewards and recognition programs.
One of the most popular incentives used by rewards/loyalty programs is the “points” system. The idea is the member accumulates certain number of points for specified activities defined by the sponsor of the program (e.g., 1 point for every $1 spent, 1 point for visiting a sponsoring merchant, etc., 1 point for every mile traveled, etc.). Then, the member is given the opportunity to redeem the accumulated points for a “reward.” The reward may be a product, service, or even cash that can be obtained by redeeming a specified number of points (e.g., 1¢ back for every point, a free camera for 3,400 points, a free plane ticket for 50,000 points, etc.).
There are various disadvantages of the current points based incentive programs. First, the rewards available for redemption are extremely limited. Typically, products available for redemption are generally products that are overstocked or outdated and are sitting in warehouses, either purchased by the sponsors at a discount or contracted by the warehouse vendors to help move the products. Therefore, majority of the members find themselves ordering products they do not need or do not find very appealing to burn the points before losing them or letting them go to waste.
Second, the redeemable price and the cost spent are generally disproportionate. That is to say, the amount the member must spend to accumulate a point is far greater than the point is worth when the time comes to redeem it. For example, many reward programs equate 1 point for every $1 spent. But, a typical rewards catalog will list a camera, for example, with a street price of $150 to be redeemable with 3,400 points. As another example, typical airlines equate 1 point for every 1 mile traveled. But, to obtain a free plane ticket to a destination within the continental United States, typical airlines require 50,000 points or more. Given that the distance between the east coast and the west coast is only about 3,000 miles; such an “incentive” does not necessarily encourage a consumer to become a member just for the reward. Even cash back reward programs typically only give back 1% of the amount spent, and many sponsors push to apply the cash back as credit against the bill or issue the cash as gift certificates.
Third, the redeeming process is extremely inefficient and inconvenient. The typical wait time between requesting for redemption of the points to actually receiving the reward is about 4 to 8 weeks, depending on the requested reward. Even when cash back is requested, the processing time generally takes about 4 to 6 weeks, especially when a check or gift certificate is to be issued. Because of the delay in the processing, the points total will not reflect the pending redemption amount until the points are redeemed. Accordingly, the offered “rewards” do not appeal to consumers who understand that the economics behind the rewards program are not only inconvenient but are not really incentives at all.